EIA August STEO predicts production rebound in 2014

By Erin Voegele | August 08, 2013

The U.S. Energy Information Administration has published the August issue of its Short-Term Energy Outlook report, forecasting that U.S. ethanol production will average 920,000 barrels per day in 2014. The EPA attributes the expected increase to increasing renewable fuel standard (RFS) targets and strong demand for renewable identification numbers (RINs). Production averaged 900,000 barrels per day during the first half of 2012 and 820,000 barrels per day from July 2012 through March 2013.

In the STEO, the EIA provides an overview of recent D6 renewable fuel RIN prices, noting that new daily highs of more than $1.40 per gallon were experienced in July. Prices returned to a level near $1.00 by the end of the month.

According to the EIA, the increase in ethanol RIN prices provides an economic incentive for two market changes. First, higher ethanol RIN prices should lower the market price of E85 relative to E10. In addition, D6 renewable fuel RIN prices that are equal to or near the price of biodiesel RINs may motivate biodiesel blending in excess of RFS targets.

Regarding retail prices, the EIA said it expects diesel fuel prices to be most affected by higher RIN prices.

The STEO report also products that Brent crude oil spot prices will average $104 per barrel during the second half of 2013, down from $108 per barrel during the first half of the year. In 2014, the price is expected to drop to $100 per barrel.

Retail prices for gasoline averaged $3.50 per gallon on July 1, and $3.63 per gallon on Aug. 5. During the third quarter of 2013, gasoline prices are expected to average $3.59 per gallon, and drop to an average of $3.37 per gallon in 2014.

The EIA’s most recent weekly ethanol production data shows that production increased the week of Aug. 2, reaching 853,000 barrels per day. Production was up compared to the 832,000 barrel per day production level the week prior. When compared to production one month prior, the week of July 5, production was down from 881,000 barrels per day.